PE Week Wire: Thurs., March 1, 2007

*** Private equity funds focused on the emerging markets raised over $33 billion last year, which was 29% higher than the $26 billion raised in 2005 and 5x the $6.5 billion raised in 2005. You might want to just chalk this up to China, but it actually was across all emerging market regions. For example, there was major growth in Latin America (which actually surprised me), Sub-Saharan Africa and the Middle East (which didn’t). It also was across sub-asset class, with the 153 funds being fairly evenly-split between venture capital, buyouts and growth/expansion equity (39%). This data comes from the Emerging Markets Private Equity Association, and its executive director Sarah Alexander provides additional data and analysis here.

*** Venrock Associates today announced that it has added Silicon Valley consultant and author Rich Moran as a new partner, with a focus on digital media and software. Expect another press release from Venrock within the month. This one will announce the final closing of its fifth fund at or around $550 million. A regulatory filing indicates that it had secured $520 million through Valentine’s Day, but there’s a bit more to go…

*** More than once, I’ve noted that today’s mega-buyout professionals possess an attitude that is frighteningly reminiscent of venture capitalists circa 1999. Yesterday at the Super Returns conference in Frankfurt (which I really should have considered attending), Carlyle Group co-founder David Rubenstein tackled that topic. For your convenience, I’ve uploaded his PowerPoint presentation to peHUB.

Rubenstein cited a number of reasons to be concerned, including the aforementioned explosion of commitments to emerging markets funds (a trend which Carlyle has helped to spearhead). Moreover, he notes that almost all of history’s largest leveraged buyouts have occurred since the beginning of 2005 (not accounting for inflation). This includes 9 of 10 in the U.S. and 7 of 10 in Europe.

He concludes, however, that there will be a softening, but not a crash. And I tend to agree with him, although some of his reasons seem a bit suspect. For example, he notes that private equiteers realize that this current environment is unusual – as opposed to bubble-era VCs who touted the end of economic cycles. Agreed – but I think it’s more like stealing a bunch of money and knowing that you’ll eventually get caught. Spend it now while you still can have some fun… (Note: I am not accusing anyone of stealing anything – it’s just a lousy analogy). Moreover, he notes that LBOs are better-equitized today than they were in the past. That is indeed notable, but not without the qualifier that lots of that equity gets securitized away. Finally, there is the recent LBO standby of how companies operate better as private entities.

But, again, all in all I think Rubenstein is correct in his conclusion (unless there are a few enormous LBO-backed busts that shake lender confidence). What say you?

*** As a related note, DealBook has done a great job of covering the Super Return conference. Take it all in here.

*** Finally, just another reminder that you can vote for some of this year’s Buyouts Deals of the Year. Specifically, online balloting is open for Mega-Deal of the Year, Large Market Deal of the Year and Exit of the Year.

Top Three

EUSA Pharma Inc., a specialty pharma company focused on the hospital market, has agreed to acquire French drug company OPi SA. The acquisition is being backed by $175 million in financing co-led by 3i Group and Essex Woodlands Health Ventures. Other backers include Goldman Sachs, Advent Venture Partners, NeoMed and NovaQuest. EUSA Pharma was formed in May 2006 with $53 million from Essex Woodlands, after which it acquired Talisker Pharma, which had a pair of CNS products.

Microbia Inc., a Cambridge, Mass.-based antibacterial drug company focused on gastrointestinal disorders, has raised $50 million in Series F funding. Ridgeback Capital led the deal, and was joined by Morgan Stanley and return backers like Fidelity Biosciences, Polaris Venture Partners and Venrock Associates. The company has raised over $200 million in total VC funding since its 1998 inception.

Astoria Generating Company Holdings LLC and EBG Holdings LLC have agreed to merge, in order to create a $5 billion power generation company serving the New York and Boston metropolitan areas. The combined company will be named US Power Generating Co., with Astoria and EBG shareholders owning 46% and 54%, respectively. Astoria was acquired from Reliant Energy last year by Madison Dearborn Partners, the Ray Hunt family and company management. EBG shareholders include K Road Power Inc. and a variety of hedge funds.

VC Deals

Intechra Holding Corp., a Carrolton, Texas-based IT asset disposition company, has raised $30.57 million in Series C funding, according to a regulatory filing. Richland Ventures led the deal, and was joined by return backers Chrysalis Ventures and Clayton Associates.

DriveCam Inc., a San Diego-based driver risk management company, has raised $28 million in Series C funding. Insight Venture Partners led the deal, and was joined by return backers Menlo Ventures and JMI Equity.

Visiogen Inc., an Irvine, Calif.-based developer of medical products for cataract and refractive patients, has raised $24 million in Series D funding. CMEA Ventures led the deal, and was joined by Foundation Medical Partners and return backers Three Arch Partners, New Leaf Venture Partners and Prospect Venture Partners. Visiogen has raised around $63 million in total VC funding in total VC funding since its 2001 inception.

Serica Technologies Inc., a Medford, Mass.-based developer of a silk-based biomaterial platform for connective tissue repair, has raised $12 million in Series C funding. Prism VentureWorks co-led the deal with existing Serica backer Morningside Technology Ventures.

Cryptek Inc., a Sterling, Va.-based provider of network security solutions, has raised $7 million in Series C funding. Return backers include Angelo Gordon & Co. and Walden International.

PopularMedia Inc., a San Francisco-based provider of private-label viral marketing solutions for major brands, has raised $4.25 million in VC funding, according to a regulatory filing. Backers include Sequoia Capital and Steamboat Ventures.

Ooma Inc., a Sunnyvale, Calif.-based provider of software for the consumer voice applications market, has secured $12 million of an $18 million Series B round, according to a regulatory filing. Return backers include Worldview Technology Partners and Draper Fisher Jurvetson. The company raised $7.8 million in Series A funding back in 2005.

Fliqz Inc., a Berkeley, Calif.-based operator of a video sharing website, has raised $2.5 million in Series B funding from Mohr, Davidow Ventures, according to a regulatory filing.

PharmaCell BV, a Dutch operator of a cell therapy cell production, has raised €2 million in a combined equity and loan financing. Limburg Ventures led the equity tranche, and was joined by Mercurius Beleggingsmaatschappij and the Maastricht University Hospital., a New York-based operator of a website for sharing blog-based information about neighborhoods, has raised $900,000 in first-round funding led by Union Square Ventures. Other participants include Milestone Venture Partners, Village Ventures and angels George Crowley, John Borthwick, and Richard Smith.

BIDS Trading, a New York-based alternative trading system startup for the equity block trading market, has raised an undisclosed amount of funding from Bank of America, Bear Stearns, Credit Suisse, Deutsche Bank, JPMorgan and Knight Capital Group.

Buyout Deals

Caxton-Iseman Capital has completed its acquisition of Valley National Gases Inc. (AMEX: VLG) for $27 per share. The total deal was valued at approximately $304 million, including around $63 million in assumed debt. Valley National is an independent U.S. distributor of industrial, medical and specialty gases delivered in “packaged” or cylinder form, related welding equipment and supplies and non-pipeline

PAI Partners completed its acquisition of the Roofing unit of Lafarge SA (NYSE: LR) for €1.96 billion in cash and €420 million in assumed debt and pension liabilities.

Rustic Canyon Partners has acquired Lason Inc. from Charterhouse Group for approximately $120 million. Lason is a Troy, Mich.-based provider of document-related outsourcing services within the business process outsourcing market.

Monomoy Capital Partners yesterday acquired Kurz-Kasch Inc. from Dover Corp. (NYSE: DOV) for an undisclosed amount. Kurz-Kasch is a Dayton, Ohio–based maker of electromagnetic products used in heavy-duty diesel engines, solenoids used in the irrigation and hydraulic valve industries and engineered composite components for the aerospace, consumer products and electrical distribution industries.

TA Associates has sold its stake in Drive Asset UK Ltd. to Charterhouse Capital Partners for $500 million. Drive Asset is a Staffordshire, UK-based provider of replacement vehicles, and received its investment from TA in 2003.

International Paper (NYSE: IP) has completed the sale of its Arizona Chemical business to Rhone Capital for approximately $485 million. As part of the deal, International Paper will retain around a 10% stake in the business. Arizona Chemical is a Jacksonville, Fla.-based pine chemistry company with 11 manufacturing facilities.

TowerBrook Capital Partners has acquired Beverages & More Inc. (BevMo), a Californian retailer of wine, spirits, beer and related items. No financial terms were disclosed. Jefferies & Co. led the leveraged financing.

Bridgepoint has acquired a majority stake in Dragenopharm Apotheker Püschl GmbH, a Germany-based contract manufacturing organisation for the European generic prescription drug market. No financial terms were disclosed.

Pine Creek Partners last quarter acquired two companies: Noble Logistics Services Inc., a Houston, Texas-based provider of logistics solutions to the auto parts and drug distribution markets; and Drew Foam Co., a Monticello, Ark.-based maker of foam for the packaging and construction markets. No financial terms were either deal were disclosed.

PE-Backed IPOs

Helicos Biosciences Corp., a Cambridge, Mass.-based DNA sequencing company, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol HLCS, with UBS serving as lead underwriter. The company has raised around $67 million in VC funding from firms like Flagship Ventures (20.55% pre-IPO stake), Atlas Venture (17.56%), Highland Capital Partners (17.56%), MPM Capital (17.56%) and Versant Ventures 13.39%).

Sirtris Pharmaceuticals Inc., a Cambridge, Mass.-based developer of therapeutics that modulate an enzyme family called sirtuins, has filed for a $60 million IPO. It plans to trade on the Nasdaq under ticker symbol SIRT, with JPMorgan serving as lead underwriter. Sirtris has raised $67 million in VC funding since its 2002 inception (plus $15m in venture debt), from firms like Polaris Venture Partners (14.91% pre-IPO stake), TVM (11.83%), Cardinal Health Partners (9.52%), Skyline Ventures (7.68%) Wellcome Trust (5.13%), Three Arch Partners, Novartis, Cargill Ventures, Cyad Group, Hunt Ventures, Red Abbey, Bessemer Venture Partners, Genzyme Ventures, QVT Fund and Alexandria Real Estate Equity.

Oncogenex Technologies Inc., a Vancouver-based drug company focused on cancer therapeutics, has amended its proposed IPO terms to five million common shares being offered at between $7.50 and $7.50 per share. It previously had been planning to offer 4.5 million shares being at between $10 and $12 per share. Oncogenex plans to trade on both the Nasdaq and TSX, with RBC Capital Markets serving as lead underwriter. Shareholders include Ventures West, BDC Venture Capital, GrowthWorks, HIG Capital and Milestone Medica Corp.

PE-Backed M&A

Cypress Semiconductor Corp. (NYSE: CY) has agreed to sell its SMaL Camera Technologies subsidiary to Sensata Technologies Inc., an Attleboro, Mass.-based sensors and controls company controlled by Bain Capital. No financial terms were disclosed. SMaL Camera provides cameras and camera subsystems to automotive driver assistance systems for such customers as Bosch and Delphi.

Rotonics Manufacturing Inc. has acquired the Rotational Molding division of The Plastics Group Inc. No financial terms were disclosed. Rotonics is a Gardena, Calif.–based portfolio company of Spell Capital Partners, while The Plastics Group is a Chicago-based portfolio company of Chicago Growth Partners. Goldsmith Agio Helms advised The Plastics Group on the sale.

American Fiber Systems Inc. of Rochester, N.Y. has agreed to acquire Idacomm, a fiber facilities-based competitive metro network provider, from Idacorp (NYSE: ISA). No financial terms were disclosed. AFS has raised around $62 million in VC funding from firms like Sierra Ventures, North Atlantic Capital, Lucent Venture Partners and Hudson River Capital.

Micro Power Electronics Inc., a Beaverton, Ore.–based provider of both portable power solutions for mission-critical equipment and custom battery solutions, has acquired SelfCharge Inc., a Richmond, Wash.-based provider of battery chargers, docking stations and battery packs. No financial terms were disclosed. Weston Presidio acquired Micro Power Electronics from Sierra Ventures and Palisades Ventures last year.

PE Exits

Citigroup Venture Capital has agreed to sell FastenTech Inc. to Doncasters for $492 million. FastenTech is a Minneapolis–based manufacturer of fasteners and precision components.

Focus Media Holding Ltd. (Nasdaq: FMCN) reportedly has agreed to acquire Allyes Information Technology Company Ltd., a Shanghai, China-based online advertising firm. The deal is valued at up to $300 million, including $70 million in cash, $155 million in Focus ordinary shares and a possible stock earn-out of $75 million. Allyes has raised $35 million in VC funding from firms like IDG Technology Ventures and Oak Investment Partners.

Bridgepoint has sold WT Foods, a UK-based ethnic and speciality foods supplier, to GraceKennedy Ltd. for an undisclosed amount.

Advent International is putting the UK arm of NUKEM up for sale, according to AFX News. Advent bought the nuclear decommissioning group last year from RWE AG.

Citysearch, an operating unit of IAC (Nasdaq: IACI), has agreed to acquire Insider Pages, a Redwood City, Calif.-based provider of reviews-based local search solutions. No financial terms were disclosed. Insider Pages has raised VC funding from Sequoia Capital and Idealab.

Other Deals

Powertech Technology Inc., a listed Taiwanese memory chip testing and packaging company, reportedly has raised $65 million from Intel Capital. The deal is part of a NT$3.5 billion convertible bond offering that Powertech priced in the middle of February.

Firms & Funds

O’Reilly AlphaTech Ventures has closed its inaugural fund with $51 million in capital commitments.

Northgate Capital of Danville, Calif. has raised $100 million for its fourth venture capital fund-of-funds, according to a regulatory filing.

Alliance Semiconductor Corp. has completed the sale of its 79.31% stake in Solar Venture Partners for $5 million in cash to Willowridge and Thomas Weisel Partners. SVP portfolio companies include Crosslayer Networks, Epiance and Ontologent.

Capital Dynamics, a Switzerland-based private equity asset manager, has opened an office in Hong Kong. It will be run by CD director Markus Ableitinger

Human Resources

Matthew Janchar has agreed to join Berkshire Partners as director of capital markets, where he will lead the firm’s financing activities. He previously was a managing director with Oak Hill Advisors and, before that, worked in the leveraged finance group of Goldman Sachs.

OMERS has named Michael Nobrega as its new CEO, effective March 12. Nobrega is president and CEO of Borealis Infrastructure, which manages infrastructure investments for OMERS.

Colorado PERA has named Tim Moore as director of alternative investments. He joined PERA in 1996, and has worked on the alternatives staff since 1999. He replaces Chris Reilly, who left late last year.

Sean Wallace has joined Darby Overseas Investments as senior managing director for Asia Pacific. He will be based in Hong Kong, and previously was head of Asia-Pacific capital markets for JP Morgan Chase.

Spencer Hoffman has joined Lovell Minnick Partners as a principal in the firm’s Radnor, Pa. office. He previously was with Safeguard Scientifics.

Bill Suddath has joined Baird as an Atlanta-based managing director in the firm’s healthcare I-banking group. He previously was a managing director on the healthcare services team of JMP Securities.


Correction: The new Trimaran spinout fund will be called Mistral Equity Partners. Also, Donny Deutsch is chairman, not CEO, of Deutsch Inc.